Tuesday, February 25, 2014

Invited Guest Blogger Spouts Off by Harvey Homitz

The League of Discriminated Scientists
The Office Bar and Grill
26. 26N 82.04W

Attn: Kathleen Rest, Executed Director
Dear Union of Concerned Scientologists,
What a wonderful gift was your 2014 Calendar...and just in time for Christmas, Hanukah, Kwanzaa and the Idle-Fitr. (Good timing for the mid term elections eh?! well good on ya mate we got it  ...wink, wink, nod, nod, if you get my drift)... ‘course not many of the rubes will catch that one, right?
Now don’t get me wrong, just because I’m a foreigner, I’m all for diversity so long as it’s confined to tattoos, body piercing, silly clothes and the like but NOT as regards heresy!
No! No! We’ve all got to put our foot down with a firm hand on that one. Imagine what a mess we’d be in if everyone was allowed to think independently. Matter of fact, that’s what the problem is today... just like your calendar says about our Senators... far too many silly ideas and no one except your good selves (the constipated Scientologists) to keep ‘em on the straight and narrow. Obviously they need a good tongue lashing up the side of the head once in awhile, or a good dunking or stretching on the rack as your esteemed Head Scientologist, Tommy Torquemada, PhD , MWHW*, would have it for the infidel dissenters. 
But YES! You’re right on the money! We need a lot more Orthodoxy, and I don’t mean black hats with curly hair ringlets hanging down from under them, No! We need good Scientological orthodoxy like your calendar!! Tell 'em like it is and what to think. How else are we going to rein in the Egyptians and other folk living by denial? How are we going to step up to the plate and stamp out heresy with an iron fist if we can’t get the message (our message) across?
Take Global warming (oops! Climate Change) for example. I’ll bet you $5 to a jar of dehydrated water that if you gave them a thermometer to measure global warming they wouldn’t know which end to insert, let alone where to stick it.
But I digress. Back to the point and I expect you’ve caught on by now, you must be a smart lady with all those letters after your name - a bit of yeast, so to speak, in the otherwise unleavened dough of the Numerati, so here goes:
Why not give a thermometer to every member of congress and sponsor an annual award (like the Oscars -- perhaps the Rectors?) to the Senator with the best sound bite on where to stick his/her thermometer?
Now 635 cheap Chinese thermometers won’t break the bank but it will goose your circulation and grab a great photo op. But be sure to use the +/- 3 degree accuracy thermometers used to collect the past few hundred years of adjustable data.
Just imagine; the Union of Concerned Scientologists standing shoulder to shoulder with concerned Sanitarians (their Rotunda in the background). That’s the sort that really grabs folk by the ‘attentions’ (if you follow my drift!?), not to mention distracting the Tea Party from closing the $$piggot. It’s a win win if ever I thought of one!
Next year, (let’s hope those Senate Bozos keep the $piggot open for hard core scientology fact finding like the impact of Beaujolais corks on the mating habits of Mangrove Cuckoos, and such).
Keep up the good work; we’re all on board with you, backs to the wall and all that (you can’t be too careful these days, with all those Progressive folk jumping out of their closets every time you turn around).
All the best,
Yours from the Far Right,
Harvey H. Homitz. MA Oxon, Dip. Prod. Camulodunum, etc.
Roving Ambassador at Large for $PIGGOTS**
p.s. We’d like to make a donation but we already gave to SETI ! They said we’re desperately in need of extraterrestrial intelligence; seems there’s not much of the local variety left!
  • My Way or the High Way**
  • $ociety for the Prevention of Incestuous Government Grants On Twisted Science

Tuesday, February 18, 2014

Don't Rock the Boat

The catchphrase for 2013 and 2014 should be from the 1973 Hues Corporation single – Rock the Boat. The phrase is Don’t Rock the Boat. To remind you of this great song you can go to this link and see it performed (http://www.youtube.com/watch?v=dndAXxqJbc0 )

Great words to this tune-- So I'd like to know where, you got the notion
said I'd like to know where, you got the notion to rock the boat, don't rock the boat baby, rock the boat, don't tip the boat over, rock the boat, don't rock the boat baby, rock the boat-t-t-t-t

Anyway now that I have you tapping your cane, you have to admit that Don’t Rock the Boat fits perfectly into our general situation. Our government recently passed legislation that can only be described as a two-year effort to postpone real progress on, err, anything. It didn’t address budget deficits. It didn’t address income distribution. It didn’t address long-run entitlement reform. It didn’t address immigration. And the Fed announced the beginning of monetary tapering. But the actual amount of tapering could have been lost in an ant hill. It was like you announcing to your spouse after washing one fork after the family Christmas dinner that you are serious about doing the dishes every night in the future.

Think about it. Our collective mantra today is not to rock the boat. And maybe that is understandable. Our boat got really rocked. The year 2007 began a voyage in very choppy waters. There were times when we were not sure if we would survive. But we hunkered down and we bailed water and now that storm has passed. One does not have to be an economic expert to identify how shell-shocked we were – and still are. Painful memories remain and we find ourselves in a leaky vessel with much that needs to be fixed.

But the remedies to the existing problems seem to be about as destructive as the storm itself. Every single important policy solution amounts to salt in a wound. This painful policy process is not new. It is virtually ALWAYS the case that policy intends to benefit the so called greater good while admitting that some will be harmed. Today, however, the problem is worse because so many people feel that they bore the burden of the last years. They do not want to bear any more. They choose to live in a broken boat because fixing the boat will hurt. Make the hurt go away (which reminds me of the song Make the World Go Away)!

Think of all the policy areas where we have made no progress and where solutions seem distant because we don’t want to create negative impacts on anyone. Immigration policy could make it harder for some people to stay in the US. Entitlement Reform would mean that some people will have smaller future pensions or weaker healthcare plans. Social policy changes will mean that some people will find it harder to afford food and shelter. Tax reforms would eliminate tax preferences and raise income tax bills for many people.

Expecting people to want change and reform right now, therefore, is a little like asking an airline crash victim to fly to Sochi for the Winter Olympics. That outcome is pretty unlikely.  In the meantime we might admit that we are in rehab. If you have been in any sort of rehab lately you know several things. First, you are not going to get better without a little pain. Second, you expect that while the healing process will be tough it will be over someday. Third, you will get back to life more or less as it used to be.

If you buy this story about Not Rocking the Boat and rehab, then you believe that today’s frustration with policy may last a bit longer but that the pain will eventually end and we can look forward to a time period when government begins to function. 

While restoration of the policy process sounds optimistic it does not necessarily mean we are up to the task of fixing our problems. So it could be a bit longer before you see any difference. But even then, ideological differences will remain and it is safe to say that our economic challenges are both wide and deep. Rehab might end but then there is dealing with the real issues we face. Back to normal means rehab is over but normal does not imply a rebirth of sanity in government.

Tuesday, February 11, 2014

Misleading and Dangerous Compromises and Irrelevant Debt Ceilings

The recent budget compromise sounded good. The hated austerity package was lifted and replaced by small increases in government spending. The pundits either praised or largely ignored the new legislation. Supporters on both sides of the aisle pointed out that discretionary government spending would be held in check and that budget deficits would shrink in the next two years. Federal government deficits that exceeded the trillion dollar mark during the worst of the recession would dip below $500 billion in 2015. Many photos were taken of men and women toasting their great compromise accomplishments. As I try to convince you of below, that picture is a lot like Putin getting an award for excellence in portraying Russian history at the opening of the Winter Olympics.  After discussing the debt ceiling I will return to why the above description of the compromise is both wrong and dangerous.

Dumber than the explanation of the compromise is the coming heated political battle over the debt ceiling. Imagine for a minute that our government required each of us to have a 14 foot statue of Justin Bieber in our living room. Okay if you don’t like Justin Bieber, let’s agree on a smiling John Kerry. Soon after the ink was dry on this new legal requirement some crack construction engineer would conclude that the average house ceiling is only 7 feet high and many people would need to raise their ceiling. So what if the enlightened government could not find votes to raise ceiling height? The statue was okay but the voters didn’t want to raise their ceilings. You say – Larry you are on the sauce again but you have to admit that this issue with the budget ceiling is the exact same thing. The agreed budget compromise results in more debt. It might only be $500 billion – but it is MORE DEBT. If the budget compromise implies more debt and that debt exceeds the current ceiling – then you gotta sell the bonds. There is no real debate here. Raise the ceiling!

Let’s get back to the compromise itself. The Congressional Budget Office recently published Federal government budget figures that are based on the recent compromise. They provide estimates of the budget through 2024 (at that point my emotional age will be almost 19).  http://www.cbo.gov/publication/45010

The CBO is usually referred to as an unbiased and nonpartisan publisher of all kinds of budget and economic data. No one really knows that will happen between now and 2024 but the CBO is pretty good at this kind of thing and most people use this information even though they know the future might not turn out exactly as they say. In other words – I am not making this stuff up so I can sell advertising on my blog and become a rich hip urbane globe trotter.

The first thing I look for is debt. No matter what the details are – the debt shows us how it all comes out in the wash. Taxes up, spending down, whatever – let’s see what the compromise implies for the national debt. Most people use the version of the debt called the Net Debt Held by the Public. That is because the gross debt is gross. All teenage girls know that anything gross is bad and the same goes for debt.  The net public debt debt was about $12 trillion in 2013. CBO projects it to be $16 trillion in 2019 and then $21 trillion in 2024. Hmm. The compromise did not reduce national debt. I have a Casio calculator and it tells me the debt will grow by 33% in 6 years; 75% in 10 years. Does that blow your shorts off or what? Your government smiles and tells you that it has compromised and taken care of our budgeting problems. Imagine getting all your personal debt right up to your limit and then asking the bank to loan you another 75% more.

Just to check if you are awake or not please answer the following one question quiz. Is it good for you or not to have one small tiny little smidgen of JD in the afternoon just before nap time?

How is it possible for them to congratulate themselves on slowing spending when they are planning to increase the debt by 33%?  Easy. You tell the truth but you don’t tell the whole truth. Your son asks you if you ate your vegetables today. You say yes but the truth is you had three Bloody Marys with a dozen glazed donuts. The CBO reports that one part of the government spending budget is Discretionary Spending.  DS was about $1.2 trillion in 2013 and is expected to be below $1.2 trillion until 2018. Get out the firecrackers. That is real budget discipline! But Whoa Nellie, that is only part of the story. The whole budget includes DS plus Mandatory Spending plus Interest. I won’t go into all the details but if you just focus on the total of all that stuff, government spending was $3.5 trillion in 2013 and the compromise takes it to $4.4 trillion in 2018 and then $6 trillion in 2024. My trusty Casio says government spending will increase by 28% in five years and 74% in 10 years.

Are politicians disingenuous or what? They parade around congratulating each other and talk about all the touch decisions they made and they end up increasing debt and spending by 75% over the next 10 years. Yet soon they will make a big deal about the people they hurt. They will probably shut down the government over a ceiling fight that makes actually no sense. And the sick thing about all this is that the discretionary spending limits hurt a lot of people. This whole charade is a way to spend even more of our money. DS will have to increase soon because of the misery it creates. But those politicians cannot change how much we spend on interest and they are afraid to touch Mandatory programs like Social Security and Medicare. So watch out for the next compromise – spending and debt will likely go up by 100% next time. Champagne will flow in DC…at least until the bond vigilantes find us out. Check out what is happening in the developing countries right now as their governments struggle yet another time with exploding debts.


Tuesday, February 4, 2014

Weak and Unbalanced: The Story of US Economic Growth Since 2007

We are now beginning our seventh year following the end of the previous business cycle. Most business cycles don’t last seven years. Yet the story is that we continue to struggle with recovery and despite a relatively strong end to 2013, many Americans believe we remain mired in a recession. So it is helpful to examine the last six years of growth to see what is what.

It is a pretty simple story. The economy is well below where it should be. The main strength in the economy has come from consumer durables largely the result of historically low interest rates and American’s love of autos. Close behind autos is government spending on non-defense items. While export sales of goods and services seem impressive – import sales on services have also increased – so even international trade ends up as a modest factor when we net imports from exports. On the negative side is a failure to revive spending in construction and reductions in state and local government spending. Federal government spending on defense has also not recovered to 2007 levels. Business spending on equipment grew by a mere 4% in six years.
Below is the analysis that supports those conclusions. The table below comes from newly released figures for real (chained) GDP from www.bea.gov .

At the end of 2013 real GDP reached almost $16 trillion. There is much being written about the US economy growing by 3.2% in the fourth quarter of 2013 and more than 4% in the quarter before that. Clearly the economy is gaining some momentum as I said in an earlier post. It is helpful, however, to take a longer term view of the US economy’s growth. In that way we get a more complete picture as to where we have come in the past six years. Last week I focused on 6-year employment changes. This week the focus is on national output or real GDP.
In the third data column in the table below I calculate the change in real GDP since the fourth quarter of 2007. In those six years real GDP has grown by almost a trillion dollars – or $970 billion. That $970 billion amounted to a 6.5% change since 2007. Percentage changes are in the fourth column of the table. National production was 6.5% higher at the end of 2013 than it was in the closing quarter of 2007. Think of real GDP as a big pile of stuff (goods and services) that the country produces in a year. The pile was some 6.5% higher in 2013 than it was in 2007.
While we all know that we suffered a recession in 2008 and half of 2009, this 2013 pile is pitiful. Yes, it is 6.5% bigger than the pile of 2007. But keep in mind that we have had almost five years to grow after the end of the recession. It is not unusual in past recoveries that real GDP would grow by 6.5% in one year. But then this was not a typical recession. So let’s ask what would have happened if the economy had grown by 3% each year since bottom of the recession. The economy bottomed at about $14.4 trillion, so a 3% annual growth rate would have brought the economy to about $16.5 trillion by the end of 2013. If the economy had grown at an average of about 4% per year since the recession, real GDP would have reached about $17.1 trillion at the end of 2013. The slow post-recession growth has cost the country's output somewhere between $500 billion and $1.1 trillion. Of course, since population growth did not stand still over these six years the result has been virtually no increase in output per person.
We could also ask what would have happened if the economy had grown by 3% since 2007. Normal growth in the economy without a recession would have brought us to producing about $18 trillion per year. Thus, the economy is about $2 trillion behind where it normally would have reached. We cannot revoke the recession but it helps to have a benchmark that shows what we have lost from a combination of the recession and the subsequent slow growth. We could say the recession cost us about a trillion and the slow growth another trillion.

The next question concerns the allocation of these goods. The shortfall in national production was not evenly shared. The data shows that some sectors have done much better than others. Traditional macroeconomic analysis breaks GDP into buying components based on who does the buying – generally referred to as consumption, investment, net exports, and government. The table lists most of the key GDP demand-side components.
Here is what we learn from GDP components from 2007 to 2013
·        We have very unbalanced growth

·        Despite massive stimulus and extreme monetary policy, the evolution of real estate is incomplete. Spending by households on new shelter and companies on structures, remain 17-20% behind 2007. Keep in mind that these sectors are recovering from a very low base. So low percentage increases on a low base are especially weak. 

·        Household spending on durable goods – especially automobiles – is carrying much of the load of spending. Other consumer spending – on nondurables (like food and clothing) and consumer services – have grown roughly equal to the lackluster pace of the overall economy.

·        Spending on business equipment rose by 4% in six years. This is an important sector for productivity and competitiveness since it pays for new capital and drives innovation and modernization

·        Government stimulus has come mostly from federal spending on non-defense. Defense spending and State and Local Government Spending remain well below 2007 levels.

·        What remains is foreign trade. Exports of both goods and services have been a mainstay of the spending increases but some of the growth in domestic spending has been imported services and goods. Inasmuch, the net impact from trade is not impressive.
Consider the components that were still languishing in late 2013. These GDP components have not regained spending levels of 2007 (in parentheses is the percentage amount in 2013 relative to 2007)
·        Structures (-19%)

·        Residential Construction (-17%)

·        State and Local Government (-5%)

·        National Defense (-2%)

GDP demand sectors showing the most strength since 2007 were:
·        Consumer Durable Goods (18%)

·        Exports of Goods (22%)

·        Exports of Services (17%)

·        Imports of Services (17%)

·        Federal Government on Non-defense (11%)

TABLE. Selected GDP Components 2007, 2013, and Change

(billions and percent change)

Source: www.bea.gov  Chained version of Real GDP

C Durable goods
C Nondurable goods
C Services
I  Structures
I  Equipment
I Residential
Exports Goods
Exports  Services
Imports Goods
Imports Services
G National defense
G Nondefense
G State and local